Medicare compliance review unlikely to succeed

Nov 15, 2022
Hand with magnifier above green pills on Australian Dollars.

Minister for Health Mark Butler has given in to pressure from some media outlets and on 5 November announced an independent review into Medicare compliance to report in four months – a requirement which means it will struggle to deliver on its main terms of reference.

Minister Butler has asked Dr Pradeep Philip to “assess the possible value of fraudulent, non-compliant or over servicing risks in Medicare and provide a methodology and evidence-based estimate of the likely value of non-compliance in Medicare”, with an interim report at the end of January next year, and a final report by the end of February.

It is not a generous time frame, with less than three months to produce an interim report – including a period of at least a fortnight when all public service activity in Canberra grinds to a halt. And a further month to tie off all the loose ends and deliver a final product.

Let’s assume that fraud means claiming for a service that was not provided at all, or claiming for a different and better remunerated service than the one provided. The mass of data held by Medicare simply does not allow this to be ascertained directly (unless the fraudster does silly things like billing for a patient who has died). This is why the compliance staff in the Department of Health look at doctors’ patterns of service provision to identify anomalous behaviour, which can then be scrutinised more closely.

To measure fraud directly, patients need to be involved in identifying fraudulent services. Patients need to be shown a copy of their Medicare records and asked whether or not they received the services listed on the days shown from the doctors who billed for them. Ask a large enough number of patients in a properly stratified sample of the patients of a properly stratified sample of all doctors claiming under Medicare, and it would be possible to make some statistically valid estimates of the extent of fraud.

Such a process is neither quick, nor easy, nor cheap. Doing it properly, with appropriate ethics scrutiny and privacy protection, and generous resources to contact and follow-up with patients, would take several years. In the absence of this sort of process, it is hard to see how Dr Philip can arrive at “an evidence-based estimate” – far less produce it in three or four months. We can only hope that he does not resort to the “data is the plural of anecdote” approach, or else simply apply to Medicare fraud rates derived for other programs in other countries.

Dr Philip has also been asked to address non-compliance and over-servicing. Much of the media coverage of the last few weeks has focused on the practice of direct-billing Medicare and charging an additional payment fee – which is non-compliant. (Although as I suggested in an earlier article, patients are potentially better off under this arrangement than if they paid the whole amount as a patient fee and waited for the Medicare rebate to be credited to their account.)

Measuring this sort of non-compliance requires either asking the patient what they paid, or else a forensic examination of the accounts and Medicare billings of the provider. Again, a statistically valid estimate will require a complex and lengthy process, beginning with amendment of s129AAD of the Health Insurance Act 1973 to allow the government to access provider records absent a “reasonable concern” that benefits have been overpaid.

Over-servicing is a little easier, as long as one is prepared to make assumptions about the level of departure from normal practice that is inappropriate. For example, it is possible to quantify the cost of the marginal pathology tests ordered by the top X per cent of GP orderers compared with the next highest percentile, and assume that cost is unnecessary.

However, in considering the financial implications of over-servicing it is also important to consider the impacts of under-servicing and the financial consequences of addressing this. For example, data provided to the Aged Care Royal Commission suggested that one in eleven aged care residents did not see a GP at least once a year. And they were just about as likely to win Tatts as they were to receive a specialist consultation in their residence. It is also clear that residents in outer regional and rural areas are significantly under-serviced.

Of course it is important to minimise fraud and non-compliance in Medicare, just as in any other government program. However, it is hard to see the Philip review reaching any substantive conclusions on the extent of fraud and non-compliance by the end of February next year. The most it will be able to so is sketch out the analytical approaches that will be required to measure fraud and non-compliance.

I agree with many other commentators that the claims of $8 billion in fraud and non-compliance are risible. However, if the government is to dignify these claims with an inquiry it should allow the inquiry the time it needs to do a proper job and reach comprehensive conclusions.

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